Funding in Place: Local Financing Trends Behind Today's Global Terrorist Threat
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Local Financing TrendsPrimary
Behind Sources
Today’s Global Terrorist Threat
Funding in Place: Local Financing
Trends Behind Today’s Global Terrorist
Threat
Katherine Bauer and Matthew Levitt
Abstract
Over the last decade, the terror finance landscape has changed dramatically. The proliferation of
un- or under-governed spaces has allowed terrorist organisations to exploit local populations and
resources to support their operations. Together with a trend toward self-radicalised lone actors
and self-financed individuals or small cells, this has led to a discernible trend toward localised
terrorist financing, or funding in place. As a result, some now call into question the value of
traditional tools used to counter the financing of terrorism (CFT). Such critiques typically focus on
the ineffectiveness of financial sanctions against territory-controlling terrorist organisation and/
or the difficulty financial institutions face in identifying and flagging terror-related transactions.
However, the idea that the focus of counter-terrorist financing efforts is primarily on tracking the
movement of funds through banks accounts and investigating reports of suspicious activity is
false. Rather, CFT broadly includes strategic efforts to protect the integrity of the financial system
from exploitation through standard-setting and diplomatic outreach; identification of emerging
threats and typologies and international cooperation. Likewise, the use of financial activity by
intelligence and law enforcement to track and analyse terrorist activity –so-called “financial
intelligence”—extends well beyond bank-filed suspicious transaction reports.
In this study, the authors examine current trends in localised terrorist financing and the counter-
terrorist financing tools available to deal with this shift away from transnational to more local
financing. Specifically, how geography, ideology and a host of other practical concerns shape the
manner in which terrorists raise, store and move funds. The study examines the various means
terrorists use to move money, both tried and true methods, as well as emerging trends; how
terrorist financing it not only a factor of cash money, but also of resourcing the materials a terrorist
group requires; and the re-emergence of the abuse of charities as a CFT concern. Ultimately,
they conclude that the underlying principles that have guided anti-money laundering and counter-
terror finance strategies to date – such as standard-setting, information sharing and international
cooperation – remain effective even in the face of these new challenges.
Keywords: countering terrorist financing, al-Qaeda, terrorism, financing, charities, anti-money
laundering, financial system, homegrown extremists, cryptocurrencies
Suggested Citation: Bauer, Katherine, and Matthew Levitt, ‘Funding in Place: Local Financing Trends
Behind Today’s Global Terrorist Threat’, The International Centre for Counter-Terrorism – The Hague
(ICCT) Evolutions in Counter-Terrorism, Vol. 2 (November 2020): 47-76.
DOI: 10.19165/2020.5.23
47Jurisdictional distinction and funding in place
At first, al-Qaeda financed its far-flung affiliate of time but later re-emerged as global events
groups much as a venture capitalist might enabled their return. Today, following the
provide seed money for its start-up businesses. money takes investigators down many paths,
Later, as global counter-terrorism efforts began some familiar and others entirely new.
to take their toll and core al-Qaeda fell on hard
times, the group’s affiliates sent funds back to In part, this phenomenon is the product
al-Qaeda leadership — a reverse directional of globalisation and the advent of new
flow that foreshadowed the group’s declining technologies that facilitate the mobilisation
prospects. Today, terrorist groups and their and movement of people, goods and ideas —
followers tend to follow a simpler model that as well as the raising and transfer of funds —
is less reliant on funding from far-off places: around the world. But when it comes to terrorist
funding in place. These groups still need to financing, an even greater factor contributing
move money and need to find ways to plug to this phenomenon is localisation. Terrorist
into the global economy, but their funding groups today are much more likely to self-
models are more local than global, even as finance or fund-in-place than seek financial
they leverage forces of globalisation to their support from far off benefactors. When they
advantage. do seek far-flung donors, these are typically
secondary or auxiliary rather than primary
financing sources. Again, this phenomenon is
Jurisdictional distinction both a factor of necessity (counter-terrorism
and funding in place measures and intelligence tools that complicate
international funding streams) and opportunity
Time and again the now old adage has (control of territory and the ability to inspire
proven true: by following the money, both followers to finance acts of individual or small-
governments and the private sector — from group terrorism of their own). Even groups
law enforcement and intelligence services to that enjoy significant state-sponsorship, of the
banks and other financial institutions — have kind that Lebanese Hezbollah receives from
helped thwart attacks, disrupt illicit networks, Iran, sometimes find that events (the maximum
and constrict the environment within which pressure campaign targeting Iran, the drop in
terrorist operatives and groups operate. Of the price of oil, and the impact of the COVID-19
course, terrorist threats persist, and the nature global pandemic) force them to diversity their
of these strategic threats continues to evolve financial portfolios and develop their own
even in the face of tactical successes such as means of raising funds (in Hezbollah’s case,
countering terrorist financing. Financial tools largely criminal enterprises).2
alone cannot solve the threat of terrorism, but
Nearly two decades after 9/11, jurisdictional
they have proven to be especially effective at
distinction — the particular means of raising,
mitigating such threats by making it harder for
storing, transferring, and accessing funds most
terrorists to carry out their activities.1
easily available in any given location — may
But over the last decade, the terror finance best help explain why terrorists engage in one
landscape has changed dramatically. type of terrorist financing scheme over another.
Sometimes a product of necessity, oftentimes
The breakdown of political systems and
of opportunity, terrorists have developed new
the proliferation of un- and under-governed
ways to raise and move money. At the same
spaces have allowed terrorist organisations
time, they have also reverted to historically
to increasingly control territory, creating a
tried and true funding and transfer methods,
unique funding opportunity based on taxing
including some — like abuse of charity — that
and extorting local populations, extracting and
authorities had effectively curtailed for a period
1 Katherine Bauer and Matthew Levitt, “Can Bankers Fight Terrorism? What You Get When You Follow the Money,” Foreign Affairs,
November/December 2017. Available at https://www.foreignaffairs.com/articles/2017-10-16/can-bankers-fight-terrorism, accessed 11
November 2020.
2 Matthew Levitt “The Lebanese Hizbullah Financing Threat in Europe,” Research Briefing No. 1, Project CRAAFT, Royal United Services
Institute (RUSI), (April 2020). Available at: https://www.washingtoninstitute.org/policy-analysis/view/the-lebanese-hizbullah-financing-
threat-in-europe, accessed 11 November 2020.
48Jurisdictional distinction and funding in place
selling natural resources, and even selling rights focused on raising funds more locally.
to dig for antiquities in specific plots of land.
Terrorist organisations have also capitalised On top of that, globalisation and the
on globalisation, which has facilitated ever- communications revolution has ushered in a
greater movement of ideas, people, and funds. complimentary trend where groups like the
Islamic State and al-Qaeda need not recruit,
As groups have moved propaganda online, train, fund and dispatch their own operatives
the trend toward self-radicalised lone actors when they can reach across borders through
and self-financed individuals or small cells social media and communications applications
has led some to call into question the value to inspire lone actors to act on their own. These
of combating the financing of terrorism (CFT). inspired plots cost the groups themselves
Many of these critiques focus on the difficulty nothing, and because they are typically low-
financial institutions face in identifying and cost attacks they can be self-financed by the
flagging terror-related transactions, as well as inspired lone-actors through their own funds,
ineffectiveness of financial sanctions against small-scale criminal activities, otherwise licit
territory-controlling terrorist organisation. financial loans, or similar self-driven efforts to
However, the idea that the focus of counter- secure small amounts of money needed for
terrorist financing efforts is primarily tracking low-tech and low-cost operations.
the movement of funds through bank accounts
and investigating reports of suspicious activity Deciding how to raise, store, move, or access
is a misconception. Rather, CFT broadly terrorist funds is also a factor of a group’s
includes strategic efforts to protect the integrity ideology, its geography and a host of other
of the financial system from exploitation practical, even banal concerns. Does a
through standard-setting, diplomatic outreach, group control territory? Does it prioritise
identification of emerging threats and independence over the benefits of state-
typologies, and international cooperation. sponsorship? Are there particular illicit financing
Likewise, “financial intelligence” – a term activities available to a group by virtue of
used by policymakers, law enforcement and where it is located? Such considerations also
intelligence authorities – extends well beyond contribute to the increase in localised terrorist
bank-filed suspicious transaction reports. financing activities.
The tools available to combat terrorist financing Despite this trend, however, terrorists still need
were never intended to defeat terrorism, but to move money and increasingly do so through
rather to disrupt terrorist networks and deny informal banking and value transfer systems.
them the funding necessary to carry out their Funds may be raised locally, but they sometimes
activities. Even here, such tools will always have to be sent elsewhere, for example to pay
be more effective when employed as part of for weapons or other resources. Banks are still
a larger strategy in tandem with other military, used, especially by front organisations, but
diplomatic, law enforcement and intelligence we explain that when terrorist groups need to
tools rather than instead of these. move money they increasingly do so through
Money Service Businesses, informal value
In this paper we lay out the importance of transfer systems like hawalas and, in a trend
jurisdictional distinction as a key element just now beginning to gain traction, through
explaining the fundamental shift in terrorist virtual currencies.
financing trends away from international
financing plots and toward localised funding in Increasingly, counter-terrorism authorities
place. Such models are not mutually exclusive, are recognising that terrorist financing is not
but we demonstrate here that what started out only a factor of cash money, but of resourcing
as a shift in directional flow of international the materials a terrorist group needs. In this
terrorist financing – from funds al-Qaeda core regards, procurement plays an important role
providing funds to actors abroad, to al-Qaeda in the resourcing of terrorist groups. From the
affiliates and followers sending funds back to a Islamic State to Hezbollah, groups now spend
financially depleted al-Qaeda core leadership significant time, effort and resources procuring
– has expanded into an identifiable trend explosive material and other weapons. This,
49From shifting directional flows to funding in place
too, factors into the trend toward funding in and intelligence agencies. Targeted financial
place we describe here. sanctions were deployed to block assets,
publicly expose financiers and facilitators,
Finally, we explore the return of abuse of and deter potential deep pocket donors.
charity as a CFT concern. Following post Furthermore, these targeted measures
9/11 crackdowns on the abuse of charity, this were demonstrations of multilateral and
fell out of favour as a preferred illicit finance international resolve. While other tools in the
typology for terrorist groups. But with the counter-terrorism toolkit, such as counter-
advent of the war in Syria and other conflicts radicalisation, are generational and operations
across the Middle East and North Africa, abuse are most often clandestine, targeted financial
of charity has once again become a terrorist sanctions represented an immediate and
vulnerability – and one intimately tied to our public response to the terrorist threat.
theme of localised funding in place.
They were also largely effective. Whereas al-
Given this trend toward local terrorist financing, Qaeda’s annual budget was estimated to be
the paper concludes with a discussion about roughly $30 million prior to 9/11, by 2004, it had
potential policy prescriptions to address this fallen to a few million dollars a year; by 2010,
shift in terrorist financing trends. al-Qaeda core’s annual budget was estimated
to be less than $1 million.5 Indeed, in 2005 the
From shifting directional deputy leader of al-Qaeda, Ayman al-Zawahiri,
sent a letter to the leader of al-Qaeda in Iraq
flows to funding in place (AQI), Abu Musab al-Zarqawi, asking for money
and noting that “many of the lines [of financing]
Counter-terrorist financing efforts post-9/11 had been cut off. Because of this we need a
were predicated on two principles. First, payment...”6
although the cost of an individual attack may
be small, terrorist organisations rely on a The rise of a reverse-directional flow of money
steady flow of funds to support operational going from al-Qaeda affiliates toward the
costs such as salaries, training, transportation, increasingly impoverished core precipitated
and even recruitment. Second, understanding decentralisation within al-Qaeda.7 Along
how a terrorist organisation manages its assets with the decline in funding came a “general
is critical to depriving the organisation of funds weakening of the hierarchical relationship
and disrupting its activities in the long term.3 between the core and the affiliates,” according
to former Treasury Undersecretary David
While these principles remain valid, the CFT Cohen. “The ability of Al-Qa’ida’s core to direct
regime stood up post-9/11 was designed the activities and attacks of its affiliates has
primarily to counter an organisation – al-Qaeda diminished, with those affiliates increasingly
– that largely relied on external donations setting their own goals, specifying their own
and exploiting charitable organisations and targets, and providing jihadist expertise,”
the formal financial system to raise and move he said.8 In fact, documents recovered from
funds.4 For terrorist groups, this dependence AQI in 2009 revealed that in the intervening
represented a considerable vulnerability to years (since that 2005 letter), al-Zarqawi’s
detection and disruption by law enforcement organisation, then called the Islamic State in Iraq,
3 The Financial Action Task Force (FATF), “FATF Report: Emerging Terrorist Financing Risks,” FATF, (October 2015), p. 5. Available at:
https://www.fatf-gafi.org/media/fatf/documents/reports/Emerging-Terrorist-Financing-Risks.pdf, accessed 11 November 2020.
4 Regarding al-Qaeda’s reliance on abuse of charity, see John Roth, Douglas Greenberg and Serena Wille, “National Commission
on Terrorist Attacks on the United States: Monograph on Terrorist Financing, Staff Report to the Commission,” National Commission
on Terrorist Attacks Upon the United States, 2004, p. 4. Available at: https://govinfo.library.unt.edu/911/staff_statements/911_TerrFin_
Monograph.pdf.
5 Greg Bruno, “Al-Qaeda’s Financial Pressures,” Council on Foreign Relations, 1 February 2020. Available at: https://www.cfr.org/
backgrounder/al-qaedas-financial-pressures; Roth et. al, “Monograph on Terrorist Financing,” 2004, p. 28.
6 Letter from Ayman al-Zawahiri to Abu Musab al-Zarqawi, 9 July 2005. English translation available at: https://fas.org/irp/news/2005/10/
letter_in_english.pdf, accessed 11 November 2020.
7 Matthew Levitt, “Al-Qa’ida’s Finances,” CTC Sentinel, Vol. 1 Issue 5 (April 2008). Available at: https://www.ctc.usma.edu/al-qaidas-
finances-evidence-of-organizational-decline/, accessed 11 November 2020.
8 Press Center, “Remarks of Under Secretary David Cohen at Chatham House on “Kidnapping for Ransom: The Growing Terrorist
50From shifting directional flows to funding in place
took the strategic decision to derive revenues Horn of Africa, told the New York Times: “It’s a
locally, largely to avoid foreign dependence shadow state that’s out-taxing the government
and direction, as well as disruption.9 even in areas it doesn’t control.”15
By the late 2000s, most al-Qaeda affiliates Today, observers note more “terrorist
had diversified their funding streams, most economies,”16 where groups take advantage
prominently engaging in such criminal tactics of weak, corrupt states lacking rule of law or
as kidnapping for ransom and extortion. In full territorial control to tax, extort, and exploit
northwest Africa, al-Qaeda in the Islamic local resources. Speaking in 2016, former US
Maghreb (AQIM) received roughly $100 million Deputy National Security Advisor Juan Zarate
in ransom payments between 2008 and 2014.10 noted some of the challenges presented by
In 2015, al-Qaeda in the Arabian Peninsula such terrorist economies:
(AQAP) took advantage of the ongoing conflict
in Yemen to take control of parts of Hadramawt The constraints on our financial gameplan
governorate, seizing as much as $100 million have been twofold: a lack of good
from a Central Bank branch,11 extorting funds information about the specifics of the
from the national oil company, and raising as ISIS economy and its continued control
much as $2 million per day in taxes on goods of territory that allows them access
and fuel coming into the port of al-Mukalla.12 to populations and resources, like oil,
In Somalia, al-Qaeda-affiliated al-Shabaab antiquities, and granaries. There is also
generated as much as $25 million in revenue the problem that ISIS—in occupying major
from the illicit charcoal trade alone when it urban centers—has created economic
controlled Kismayo port from 2009-2012, defensive shields, understanding that we
according to the UN Monitoring Group on are not going to bomb all the banks in
Somalia and Eritrea.13 The group continues Mosul or starve the economy of millions
to generate significant revenue through of people. There are material constraints
extortion, even in areas it no longer controls: to what we can do while ISIS controls real
it is estimated to have made as much as $13 territory and populations.17
million during the first six months of 2020 from
checkpoints and mafia-style protection rackets Likewise, the collapse of the Islamic
targeting merchants and traders in Southern State’s (IS, or ISIS) territorial caliphate has
Somalia, including at Kismayo port.14 “It’s no fundamentally altered its financial structure
longer an insurgency but an economic power,” and its relationship with global affiliates.
Rashid Abdi, an analyst specialising in the Despite the Islamic State’s early prosperity, its
Financing Challenge”,” US Department of the Treasury, 5 October 2012. Available at: https://www.treasury.gov/press-center/press-
releases/Pages/tg1726.aspx, accessed 11 November 2020.
9 Patrick B. Johnston et al., “Foundations of the Islamic State: Management, Money, and Terror in Iraq, 2005–2010,” (Santa Monica, CA:
RAND Corporation, 2016) p. xxiv. Available at: http://www.rand.org/content/dam/rand/pubs/research_reports/RR1100/RR1192/RAND_
RR1192.pdf, accessed 11 November 2020.
10 Rukmini Callimachi, “Paying Ransoms, Europe Bankrolls Qaeda Terror,” The New York Times, 29 July 2014. Available at: https://www.
nytimes.com/2014/07/30/world/africa/ransoming-citizens-europe-becomes-al-qaedas-patron.html, accessed 11 November 2020.
11 Analytical Support and Sanctions Monitoring Team, “Twenty-second report of the Analytical Support and Sanctions Monitoring
Team pursuant to resolutions 1526 (2004) and 2253 (2015), United Nations Security Council, 27 July 2018. Available at: http://undocs.
org/S/2018/705.
12 Yara Bayoumy et al., “How Saudi Arabia’s War in Yemen Has Made al Qaeda Strong—and Richer,” Reuters, 8 April 2016. Available at:
http://www.reuters.com/investigates/special-report/yemen-aqap/, accessed 11 November 2020.
13 Kim Sook, Letter exchange between the Chair and the President of the Security Council Committee pursuant to resolutions 751
(1992) and 1907 (2009) concerning Somalia and Eritrea, United Nations Security Council, 12 July 2013. Available at http://www.un.org/
ga/search/view_doc.asp?symbol=S/2013/413, accessed 11 November 2020.
14 Abdi Latif Daher, “Feared Shabab Exploit Somali Banking and Invest in Real Estate, U.N. Says,” The New York Times, 11 October 2020.
Available at: https://www.nytimes.com/2020/10/11/world/africa/feared-shabab-exploit-somali-banking-and-invest-in-real-estate-un-
says.html?fbclid=IwAR2I8lvFB5TKPwJhRyO2PHt4HEMYxRstY-sYAz5vDb9Ine9_0btajg6Vouw, accessed 11 November 2020. See also:
Marc Pecsteen de Buytswerve, Letter exchange between the Chair and the President of the Security Council Committee pursuant to
resolution 751 (1992) concerning Somalia, 1 November 2019. Available at: https://undocs.org/S/2019/858, accessed 11 November 2020.
15 Daher, “Feared Shabab Exploit Somali Banking and Invest in Real Estate, U.N. Says,” 2020.
16 Bryan Price, “A View from the CT Foxhole: The Honorable Juan C. Zarate, former Deputy National Security Advisor for Combating
Terrorism,” CTC Sentinel, Vol. 9, Issue 4 (April 2016). Available at: https://www.ctc.usma.edu/a-view-from-the-ct-foxhole-the-honorable-
juan-c-zarate-former-deputy-national-security-advisor-for-combating-terrorism/, accessed 11 November 2020.
17 Ibid.
51Foreign inspiration, local funding
considerable expenses created vulnerabilities
that the US-led Global Coalition to Defeat ISIS,
Foreign inspiration, local
along with the government of Iraq, effectively funding
exploited. For example, in August 2015, the
Iraqi government ceased paying salaries to Beyond its insurgent activities, IS remains a
employees in IS-controlled territories, thereby global terrorist concern largely due to the
cutting the group’s revenue from the taxation threat posed by inspired home-grown violent
of salaries and reducing liquidity in those extremists (HVEs) who, acting alone or in small
territories.18 In late 2015, the Coalition also groups, present a particularly challenging
began to use air strikes to target and degrade terror-financing problem set. The same holds
Islamic State-controlled oil extraction, refining, true for inspired networks of White Supremacist
and transportation.19 Coalition airstrikes also or other racially and ethnically motivated violent
targeted IS cash storehouses, destroying extremist (REMVE) groups. Once an individual
millions of dollars in cash currency—an or small group has become radicalised and is
especially effective tactic in traditionally cash- determined to carry out a terrorist attack, there
heavy terrorist economies where credit cards are many ways he or she may fund an attack.
do not function. 20 Lone offender and small group attacks can be
carried out very quickly, with minimal funding
As such, the greatest impact on IS’s bottom line and preparation. As a result, authorities lose
has been the loss of territory, which deprived both the lag time within which they can run
the organisation of local resources – including an effective investigation and the benefit of
people – to tax and extort. Nonetheless, as key tripwires — like the ability to follow travel,
of mid-2019, IS continued to provide some communications and financials trails — that
financial support to its branches, as well previously proved productive to investigative
as to empower them to raise funds locally, inquiry.
according to the Financial Action Task Force
(FATF).21 As IS has reverted to an insurgency, The 2015 US National Terrorist Financing Risk
it has returned to many of the fundraising Assessment notes the case of Michael Todd
methodologies deployed by AQI, including Wolfe, from Houston, who planned to fund his
kidnapping for ransom (KFR), extortion of travel abroad to fight for radical groups in Syria
individuals and businesses, as well as some by using an expected tax refund of $45,000 to
commercial activity.22 cover his expenses. The same type of simple
self-funding could also underwrite attacks at
But funding in place is not just a function of home. “Of particular concern,” the assessment
terrorist group control of territory. It is also a bluntly concluded, “is that these homegrown
function of the ability of terrorist groups to violent extremists may use this type of activity
leverage social media and other platforms, to fund domestic terrorist activity in support
as well as often-encrypted communication of extremist ideology espoused by a terrorist
applications, to reach across borders to like- group, but without direct assistance from the
minded followers who can fund their own terrorist group.”23 According to an October
activities be they local attacks or their travel to 2020 US Department of Homeland Security
join militants abroad.
18 Daniel Glaser, “The Evolution of Terrorism Financing: Disrupting the Islamic State,” The Washington Institute for Near East Policy,
21 October 2016. Available at: https://www.washingtoninstitute.org/policy-analysis/view/the-evolution-of-terrorism-financing-disrupting-
the-islamic-state, accessed 11 November 2020.
19 Ibid.
20 Katherine Bauer, Lori Plotkin Boghardt and Matthew Levitt, “Defeating the Islamic State: The Economic Campaign,” The Washington
Institute for Near East Policy, 24 February 2016. Available at: https://www.washingtoninstitute.org/policy-analysis/view/defeating-the-
islamic-state-the-economic-campaign, accessed 11 November 2020.
21 FATF, “FATF Actions to Identify and Disrupt ISIL, Al-Qaeda and Affiliates’ Financing,” FATF, 21 June 2019. Available at: http://www.
fatf-gafi.org/publications/methodsandtrends/documents/fatf-action-against-terrorist-financing-june-2019.html, accessed 11 November
2020.
22 Analytical Support and Sanctions Monitoring Team, “Twenty-sixth report of the Analytical Support and Sanctions Monitoring Team
submitted pursuant to resolution 2368 (2017) concerning ISIL (Da’esh), Al-Qaida and associated individuals and entities,” United Nations
Security Council, 3 July 2020, p. 17. Available at: https://undocs.org/S/2020/717, accessed 11 November 2020.
23 US Department of the Treasury, “2015 National Terrorist Financing Risk Assessment,” US Department of the Treasury, 2015, p.
44. Available at: https://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/National%20Terrorist%20Financing%20
52Foreign inspiration, local funding
assessment, the most likely terrorist threat then stabbed him to death with a machete and
comes from “ideologically motivated lone a knife. Adebolajo purchased the knives the
offenders and small groups,” with domestic day before the attack, likely for no more than
violent extremists posing the “primary terrorist £20 or £30.27 In another case, in September
threat” inside the United States.24 2014, Ahmad Numan Haider used a knife to
attack two counter-terrorism police officers
HVEs may raise funds for several purposes, in Melbourne, Australia.28 In December that
including to carry out attacks at home, to same year, Haron Monis held eighteen people
fund their own or others’ travel to foreign hostage in a café in Melbourne, and ultimately
conflict zones, or to provide material support killed one person, using an unregistered sawn-
to a terrorist organisation at home or abroad. off shotgun in the attack that is thought to have
Looking back at home-grown plots in the West been purchased for a low-price on Australia’s
— including both homegrown networks and “grey market.”29
lone offenders — several key patterns emerge.
Self-financing
Low-cost attacks
In many cases, lone offenders or small groups
As large, complex terror plots are becoming may self-finance their activities through legal
increasingly difficult to carry out, many terrorists means, such as dipping into their own bank
are setting their sights lower and are planning accounts, taking out a loan, or receiving welfare
smaller, cheaper attacks. Lone offender and payments. In Europe, since 2001, the proportion
small terror cells are able to keep costs low of cells that are self-financed through licit
for their plots since they have few members to activities is higher than those cells that receive
train and equip, rely on simple weapons, and external funding.30 A review by the Program on
in contrast to larger terrorist organisations, Extremism at George Washington University
are not subject to the high and indirect costs of 209 individuals charged for Islamic State-
of developing and maintaining a terrorist related offenses in the US between 2013 and
organisation and sustaining its activities and 2020 concluded that the vast majority of US-
ideology.25 According to a 2015 Norwegian based IS supporters relied on self-financing.31
Defence Research Establishment report, 75
percent of the forty jihadi plots studied in As demonstrated above, self-financed attacks
Europe between 1994 and2013 cost less than tend to be cheaper, less sophisticated, and
$10,000 to execute.26 smaller-scale than more expensive attacks. But
because they are less likely to raise suspicions,
For example, in 2013, Michael Adebolajo self-financed attacks are more likely to be
murdered Lee Rigby, a British soldier in London. successfully carried out than attacks that
Adebolajo first ran Rigby over with his car and receive external funding. According to the
Risk%20Assessment%20%E2%80%93%2006-12-2015.pdf, accessed 11 November 2020.
24 Catherine Herridge and Victoria Albert, “China, Russia and white supremacy top DHS’ first public threat assessment,” CBS
News, 5 October 2020. Available at: https://www.cbsnews.com/news/china-russia-and-white-supremacy-top-dhs-first-public-threat
assessment/?utm_source=iterable&utm_medium=email&utm_campaign=1587190_, accessed 11 November 2020.
25 Emilie Oftedal, “The financing of jihadi terrorist cells in Europe,” Norwegian Defence Research Establishment (FFI), 6 January 2015,
p. 7. Available at: https://publications.ffi.no/nb/item/asset/dspace:2469/14-02234.pdf, accessed 11 November 2020.
26 Ibid., p. 3.
27 Laura Smith-Spark and Kellie Morgan, “What led Michael Abdebolajo and Michael Adebowale to murder Rigby?” CNN, 19 December
2013. Available at: http://www.cnn.com/2013/12/19/world/europe/uk-soldier-killing-profiles/index.html, accessed 11 November 2020.
28 James Dowling, “Inquest finding into the death of radicalized teen Numan Haider,” Herald Sun, 31 July 2017. Available at: http://www.
heraldsun.com.au/news/law-order/inquest-finding-into-the-death-of-radicalised-teen-numan-haider/news-story/2e7b7bb84e585b414
33f06ee21bf5c51, accessed 11 November 2020.
29 Tom Keatinge and Florence Keen, “Lone-Actor and Small Cell Terrorist Attacks: A New Front in Counter-Terrorist Finance,” RUSI
Centre for Defence and Security Studies, 24 January 2017. Available at: https://rusi.org/publication/occasional-papers/lone-actor-and-
small-cell-terrorist-attacks-new-front-counter, accessed 11 November 2020. ; Australian Associated Press, “Sydney siege inquest: Man
Haron Monis was a ‘psychopathic lone wolf terrorist,” The Guardian, 2 May 2016. Available at: https://www.theguardian.com/australia-
news/2016/may/02/sydney-siege-inquest-man-haron-monis-was-a-psychopathic-lone-wolf-terrorist, accessed 11 November 2020.
30 Oftedal, “The financing of jihadi terrorist cells in Europe,” 2015, p. 7.
31 Lorenzo Vidino, John Lewis and Andrew Mines, “Dollars for Daesh: Analyzing the Finances of American ISIS Supporters,” Program
on Extremism at George Washington University, (September 2020). Available at: https://extremism.gwu.edu/sites/g/files/zaxdzs2191/f/
Dollars%20for%20Daesh%20final%20report.pdf, accessed 11 November 2020.
53Foreign inspiration, local funding
Norwegian Defence Research Establishment said he paid her back afterwards.
report, “among entirely self-financed cells, 53
percent have managed to carry out their plans, Criminal activities
compared to only 21 percent among those that
receive some external support.”32 Crime has the potential to bring in sufficient
funds for a home-grown attack as well. While
In several cases, home-grown violent extremists criminal groups, lone offenders, and small cells
in the US too have used their own salaries to may differ ideologically, they often cooperate
fund attacks. For example, Christopher Lee and collaborate in criminal ventures to raise
Cornell saved his own money to buy supplies for money for attacks.37 In Europe, petty crime
his plot to set off bombs near the US Capitol. In appears to be the second largest source
2015, Cornell had enough money to purchase of funding for lone offenders and small cell
two semiautomatic weapons and 600 rounds groups.38 In Southeast Asia, particularly in
of ammunition with the intention of building, the Philippines and Indonesia, terrorists have
planting, and bombing the US Capitol and raised funds for attacks by theft, smuggling,
shooting people as they ran away.33 The FBI kidnaping, and extortion.39
caught Cornell before his was able to execute
his plan; however, he had still managed to raise Although receiving help from his family,
enough money to carry out his attack. Mohammed Merah, who carried out three
attacks in France in 2012, relied on criminal
Some lone offenders and small cells that do activities as his main source of funding
not have sufficient salaries accept money (namely theft, robbery, and drug trafficking).40
from their families, or take money without their Merah earned $58,000 by acting as a drug
knowledge.34 In other cases, self-financed courier between Spain and France, and was
terrorists ask to borrow money from friends also heavily involved in a criminal network in
and families without disclosing its usage.35 France.41 He had at least eighteen convictions
Mohammed Merah received some financial from French courts for his involvement in
and material support from his family before burglaries, thefts, robberies, and other petty
carrying out a series of shootings in France in crimes.42 Merah used this money to fund his
2012. For example, his sister Suad bought him travel to Pakistan in 2011, where he received
cell phones, allowed him to use her internet training at a camp controlled by Tehrik Taliban
while planning his attack, and purchased plane Pakistan and al-Qaeda in Waziristan. When he
tickets for him.36 In an interview, she admitted returned to France in November 2011, he had
to giving him her credit card to buy plane approximately $24,500, but wanted to raise
tickets from France to Damascus, though she additional money.43 Merah refused to admit to
32 Oftedal, “The financing of jihadi terrorist cells in Europe,” 2015, p. 21.
33 United States of America v. Christopher Lee Cornell, Criminal Complaint, United States District Court for the Southern District of Ohio,
14 January 2015. Available at: https://www.justice.gov/sites/default/files/opa/press-releases/attachments/2015/01/15/cornell_complaint.
pdf, accessed 11 November 2020.
34 Oftedal, “The financing of jihadi terrorist cells in Europe,” 2015.
35 Gerald Roberts, “Money Flow in the Age of ISIS,” Washington Institute for Near East Policy, 15 May 2015. Available at: http://www.
washingtoninstitute.org/policy-analysis/view/money-flow-in-the-age-of-isis, accessed 11 November 2020.
36 Nicola Hebden, “Intel agency monitored gunman's sister: report,” The Local, 3 September 2012. Available at: https://www.thelocal.
fr/20120903/intel-agency-monitored-gunmans-sister-report, accessed 11 November 2020.
37 Roberts, “Money Flow in the Age of ISIS,” 2015.
38 Oftedal, “The financing of jihadi terrorist cells in Europe,” 2015, p. 7.
39 AUSTRAC, “Terrorist Financing Regional Risk Assessment 2016: South-East Asia and Australia,” AUSTRAC, December 2016.
Available at: https://www.un.org/sc/ctc/wp-content/uploads/2016/12/2016-12-12-Session-III-1500-1630-Claudine-Lamond-AUSTRAC.
pdf, accessed 11 November 2020.
40 Associated Press, “Exclusif - Transcription Des Conversations Entre Mohamed Merah et Les Négociateurs,” [Exclusive - Transcription
of conversations between Mohamed Merah and the negotiators] Liberation FR, 17 July 2012. Available at: http://www.liberation.fr/
societe/2012/07/17/transcription-des-conversations-entremohamed-merah-et-les-negociateurs_833784, accessed 11 November 2020.
41 Tamara Makarenko, “Europe’s Crime-Terror Nexus: Links between Terrorists and Organized Crime Groups in the European Union,”
European Parliament Directorate-General for Internal Policies, 2012, p. 45. Available at: https://www.europarl.europa.eu/RegData/
etudes/etudes/join/2012/462503/IPOL-LIBE_ET(2012)462503_EN.pdf, accessed 11 November 2020.
42 Paul Cruickshank and Tim Lister, “How Did Mohammed Merah Become a Jihadist?” CNN, March 26, 2012. Available at: http://www.
cnn.com/2012/03/26/world/europe/france-shooting-suspect/index.html, accessed 11 November 2020.
43 Thibault Raisse, “Le Pacte Secret de Merah Avec Un Lieutenant de Ben Laden,” [Merah's secret pact with bin Laden's lieutenant]
Le Parisien, 21 March 2014. Available at: https://www.leparisien.fr/faits-divers/le-pacte-secret-de-merah-avec-un-lieutenant-de-ben-
54The role of ideology, geography, and other practical concerns
the exact crime, but he said he reconnected Ironically, the challenges posed by lone
with his criminal networks and “did some work offender and small group terrorism should
with them,” earning him a little over $12,000.44 not have come as a surprise to practitioners.
Indeed, the 9/11 Commission Report forecasted
Merah claims that al-Qaeda offered to finance that increasingly self-sufficient terrorists would
his attacks, but he refused, claiming it was “easy likely emerge:
to get money in France.”45 By March 2012, he
had purchased the weapons he would use in Though progress has apparently been
his attack, as well as additional arsenal, guns, made, terrorists have shown considerable
and ingredients for petrol bombs that were creativity in their methods of moving
later found in his apartment.46 money. If al Qaeda is replaced by
smaller, decentralized terrorist groups,
Licit financial loans the premise behind the government’s
efforts—that terrorists need a financial
Lone offenders and small cells around the support network—may become outdated.
world have exploited loans to fund attacks. For Moreover, some terrorist operations do
example, Ahmedy Coulibaly, one of the three not rely on outside sources of money and
terrorists in the 2015 Paris attacks, funded his may now be self-funding, either through
plot by taking out a £6,000 loan from the credit legitimate employment or low-level
agency Cofidis.47 He provided the agency criminal activity.51
with a phone bill, pay slips, and identification
in order to obtain the loan and finance his
operation.48 The San Bernardino shooter, Syed
The role of ideology,
Rizwan Farook, who killed fourteen people in geography, and other
the 2015 shooting, borrowed $28,500 from
Prosper Marketplace, a San Francisco online practical concerns
lender, just two weeks before their December
attack.49 Officials believe that this loan may A number of factors influence decisions by
have financed the ammunition, pipe-bomb terrorist organisations on how and where to
parts, and shooting practice at local gun raise funds, including ideology, geography, but
ranges.50 none more than prosaic and practical concerns.
The amount of money an organisation requires
Online loans are an easy way to gain fast access is determined by its size and objectives.
to large sums of cash. While banks and money Organisations that control territory, engage
lenders are required to check customers’ in insurgency, or provide social services
names against a federal database of known require additional resources. The larger and
terrorists and criminals, lone offenders and more complex an organisation’s mission, the
home-grown violent extremists are often not greater need it has for specialised procedures
known to law enforcement authorities and may and personnel to handle financial matters.
slip under the radar. For example, the Islamic State recruited “an
laden-21-03-2014-3693621.php, accessed 11 November 2020.
44 Associated Press (Liberation FR), 2012.
45 Virginie Andre and Shandon Harris-Hogan, “Mohamed Merah: From Petty Criminal to Neojihadist,” Politics, Religion & Ideology, Vol.
13, No. 2 (June 2013), p. 309. Available at: https://doi.org/10.1080/21567689.2013.792655, accessed 11 November 2020.
46 Ibid.
47 Rukmini Callimachi and Jim Yardley, “From Amateur to Ruthless Jihadist in France: Chérif and Saïd Kouachi’s Path to Paris Attack at
Charlie Hebdo,” The New York Times, 17 January 2015. Available at: http://www.nytimes.com/2015/01/18/world/europe/paris-terrorism-
brothers-said-cherif-kouachi-charliehebdo.html, accessed 11 November 2020.
48 Ibid.
49 James Rufus Koren and Jim Puzzanghera, “Loan to San Bernardino shooter draws scrutiny to online lending industry,” Los Angeles
Times, 11 December 2015. Available at: http://www.latimes.com/business/la-fi-prosper-regulation-20151210-story.html, accessed 11
November 2020.
50 Ibid.
51 Thomas H. Kean and Lee Hamilton, “The 9/11 Commission Report: Final Report of the National Commission on Terrorist Attacks Upon
the United States,” National Commission on Terrorist Attacks Upon the United States, 2004, p. 383. Available at: https://govinfo.library.
unt.edu/911/report/911Report.pdf, accessed 11 November 2020.
55The role of ideology, geography, and other practical concerns
army of accountants”;52 al-Qaeda is known for Jihad. Syrian affiliate, Jahbat al-Nusrah’s break
requiring receipts53; and the 9/11 hijackers even from al-Qaeda in mid-2016 was likely as much a
reportedly returned their remaining funds days ploy to retain Gulf donors that viewed it as the
before the attacks.54 Such financial operations “moderate extremists”56 of the Syrian conflict,
may create vulnerabilities to detection and and an effort to evade international sanctions,
serve as key nodes for disruption. as its stated desire to declare its ideological
and operational independence as a Syrian–
As such, while IS may today present a organisation (as opposed to a transnational
more limited global threat as an organised one).57
institution and a less reliable financial backer
of its affiliates and operatives, its changed Geography also has a significant influence
objective means it remains dangerous. IS on an organisation’s ability to self-fund. AQIM
has pivoted from its organised, global model targeted the European extractive industry
of terror operations to one that encourages operations in the Sahel because it thought
small, cheap, and decentralised cells. In other it was likely to recover sizable ransoms for
words, the group has lost access to much of kidnapping Europeans there.58 IS benefitted
its revenues but no longer needs anywhere from established smuggling networks to move
near as much money as it once did. Unlike oil and other resources from the territory
large attacks orchestrated over time by large it controlled to market, as well as sizable
groups, lone offender and small group attacks populations under their control to tax and
can be carried out very quickly, with minimal extort.59 However, because of differences in
funding and preparation.55 the nature of oil production between the Sahel
and Levant, and lower population density in
Ideology can also play a significant role Libya, IS’s Libyan province did not have similar
in financing decisions. An organisation’s successes.60
desire for autonomy of action may make
state sponsorship untenable. Those averse Sophisticated terrorist organisations will look
to donors’ conditioning aid on the exercise to diversify sources of funding, perhaps to
of restraint, moderation, or participation in a help mitigate dependence on a foreign or
political track will face a problem set different state donor, supplement such support, or fund
from proxies like Lebanese Hezbollah or Islamic local operations without risking transnational
52 Harriet Alexander and Alastair Beach, “How Isil is funded, trained and operating in Iraq and Syria,” The Telegraph, 23 August 2014.
Available at: https://www.telegraph.co.uk/news/worldnews/middleeast/iraq/11052919/How-Isil-is-funded-trainedand-operating-in-Iraq-
and-Syria.html, accessed 11 November 2020.
53 Conner Simpson, “Al Qaeda Are Strict About Keeping Track of Their Receipts,” The Atlantic, 29 December 2013. Available at:
https://www.theatlantic.com/international/archive/2013/12/al-qaeda-are-strict-about-keeping-track-theirreceipts/356552/, accessed 11
November 2020.
54 John Roth, Douglas Greenberg and Serena Wille, “Appendix A: The Financing of the 9/11 Plot,” National Commission on Terrorist
Attacks Upon the United States, 2004, p. 133. Available at: https://govinfo.library.unt.edu/911/staff_statements/911_TerrFin_App.pdf,
accessed 11 November 2020.
55 Matthew Levitt, “Targeting the Dematerialized Caliphate,” NATO Defense College Foundation, 6 December 2018. Available at:
https://www.washingtoninstitute.org/policy-analysis/view/targeting-the-dematerialized-caliphate, accessed 11 November 2020.
56 Katherine Bauer and Matthew Levitt, “Al-Qaeda Financing: Selected Issues,” in Aaron Y. Zelin, ed., “How Al-Qaeda Survived
Drones, Uprisings, and the Islamic State,” The Washington Institute for Near East Policy, June 2017, p. 101. Available at: https://www.
washingtoninstitute.org/uploads/Documents/pubs/PolicyFocus153-Zelin.pdf, accessed 11 November 2020.
57 Colin P. Clarke, “Al Qaeda in Syria Can Change Its Name, but Not Its Stripes,” The RAND Blog, RAND Corporation, 23 March 2017.
Available at: https://www.rand.org/blog/2017/03/al-qaeda-in-syria-can-change-its-name-but-not-its-stripes.html, accessed 11 November
2020.
58 According to the US Government, as of 2011, AQIM was planning to target mainly Europeans, not Americans, for kidnapping
operations because AQIM believed that some European governments were more likely to pay ransoms. See: Press Center, “Kidnapping
for Ransom: The Growing Terrorist Financing Challenge,” 2012.
59 Erika Solomon and Ahmed Mhidi, “Isis Inc: Syria’s ‘mafia style’ gas deals with jihadis,” Financial Times, 15 October 2015. Available
at: https://www.ft.com/content/92f4e036-6b69-11e5-aca9-d87542bf8673?shareType=nongift, accessed 11 November 2020; Erika
Solomon, Robin Kwong and Steven Bernard, “Inside Isis Inc: The journey of a barrel of oil,” Financial Times, 29 February 2016. Available
at: https://ig.ft.com/sites/2015/isis-oil/, accessed 11 November 2020.
60 Katherine Bauer, “Beyond Syria and Iraq: Examining Islamic State Provinces,” The Washington Institute for Near East Policy, 9
November 2016, p. xvii. Available at: https://www.washingtoninstitute.org/uploads/Documents/pubs/PolicyFocus149_Bauer.pdf,
accessed 11 November 2020; also, as of June 2020, ISIL-Libya raised funds by extorting small businesses and kidnapping local
dignitaries for ransom, according to the United Nations. See, See: Triansyah Djani, “Twenty-sixth report of the Analytical Support and
Sanctions Monitoring Team,” 2020, p. 9.
56Plus ça change, plus c’est la même chose:
funds transfers. While organisations such as
Hezbollah and Shia militia in Iraq are primarily
la même chose:
funded by Iran, they too have sought to terrorists still need to move
complement that state sponsorship with a
broader stream of funding from supporters money
and criminal activity both locally and abroad,
mostly to contend with the effect of sanctions An organisation’s location, relationship to
targeting Iran and the fall in the price of oil.61 state or other donors, and ability to exploit
Organisations that are reportedly self-sufficient and monetise local resources will all have a
in terms of financing, such as Hayat Tahrir al- bearing on its method of raising funds. In turn,
Sham (HTS)62, are likely continue to receive the means by which a terrorist organisation
external support, but they are no longer reliant deploys such funds will rely on similar factors,
on it. including banking and internet penetration in
a given locale, access to hard currency, and
Even where organisations are able to mobilise the ability to engage in trade and procurement
sufficient funds locally, they rely on external activities. Even when terrorist groups control
financial networks to procure goods, support territory or rely on the self-financing of inspired
foreign fighter travel or other operational fellow travellers, they will still need to find ways
activity, send financial support to affiliates to transfer funds. To do so, however, they are
abroad, and store or secret away financial likely to use a combination of means, some
reserves. Indeed, IS’s external financial and of which will be sophisticated and new while
logistics networks have undoubtedly become others will be more simple and well-known.
more important since the decline of the
territorial caliphate. Relatedly, even when Money service businesses
foreign financial flows constitute a small share
of a group’s revenue, donors–both states and Terrorists will always look for the cheapest,
individuals–will likely continue to exercise fastest, and most anonymous method to move
ideological influence on groups, such as has funds. Alongside cash and banks, money
been the case with certain Iranian proxies in service businesses (MSBs), such as exchange
Iraq.63 houses or hawala-style transfer companies,
64
are the most commonly used channel for
terrorist financing.65 Where access to banks is
Plus ça change, plus c’est limited or unavailable, MSBs provide important
61 Matthew Levitt, “Hezbollah’s Criminal Networks: Useful Idiots, Henchmen, and Organized Criminal Facilitators,” in Hilary Matfess
and Michael Miklauciced, eds., Beyond Convergence: World Without Order, (Washington DC: National Defense University, 2016) pp.
155-156. Available at: http://www.washingtoninstitute.org/uploads/Documents/opeds/Levitt20161025-NDU-chapter.pdf, accessed 11
November 2020; Michael Knights, “Iran’s Expanding Militia Army in Iraq: The New Special Groups,” CTC Sentinel, Vol. 12, Issue 7
(August 2019). Available at: https://ctc.usma.edu/irans-expanding-militia-army-iraq-new-special-groups/, accessed 11 November 2020;
Press Releases, “Treasury Sanctions Key Hizballah, IRGC-QF Networks in Iraq,” US Department of the Treasury, 13 November 2018.
Available at: https://home.treasury.gov/news/press-releases/sm546, accessed 11 November 2020.
62 According to the United Nations Analytical Support and Sanctions Monitoring Team, as of June 2020, HTS raised as much as $13
million per month through the taxation of businesses and public utilities; collection of customs and tolls at Turkish border crossings and
internal lines of control; and the control of petroleum sales and charitable operations in Idlib. See: Analytical Support and Sanctions
Monitoring Team, “Twenty-sixth report of the Analytical Support and Sanctions Monitoring Team,” 2020, p. 7.
63 Alex Vatanka, “Iran’s use of Shi’I Militant Proxies: Ideological and Practical Expediency Versus Uncertain Sustainability,” Middle East
Institute, June 2018. Available at: https://www.mei.edu/sites/default/files/publications/Vatanka_PolicyPaper.pdf, accessed 11 November
2020.
64 “Money service business” is a term used by regulators to cover business that (i) provide currency conversion services; (ii) transmit
funds and (iii) are not banks. In other words, they are not depository institutions. This category often includes what are commonly
called exchange houses. Unregulated MSBs can also include trading companies that provide remittance services and hawala-style
transfer companies. The term hawala is traditionally associated with a money transfer mechanism that originated in South Asia along
traditional trade routes in Middle East and parts of East Africa. It operated as a closed system within familial, tribal or ethnic groups. In
recent times, the term hawala is often used as a proxy to describe a wider range of financial service providers, beyond these traditional
and geographically tied systems. The Financial Action Task Force (FATF) defines hawalas as money transmitters, particularly with ties
to specific geographic regions or ethnic communities, which arrange for transfer and receipt of funds or equivalent value and settle
through trade, cash, and net settlement over a long period of time. See: FATF, “The role of Hawala and other similar service providers in
money laundering and terrorist financing,” FATF, October 2013, https://www.fatf-gafi.org/media/fatf/documents/reports/Role-of-hawala-
and-similar-in-ml-tf.pdf, accessed 11 November 2020.
65 FATF, 2015, p. 21. See also: Press Centre (US Department of the Secretary), 2018, p. 3.
57Plus ça change, plus c’est la même chose:
services in terms of sending and receiving cross-border transactions. In the intervening
remittances, including humanitarian support, years, the United States-led Global Coalition
including to conflict zones and their environs. to Defeat ISIS coalition, working closely with
However, MSBs can also act as a conduit for the Iraqi Central Bank and Counter-Terrorism
comingling illicit funds with licit remittances. Service, has continued to unravel IS exchange
Indeed, according to the UN Monitoring house networks, which reach from Iraq to
Committee for al-Qaeda and IS, unregistered Turkey, the Gulf, and beyond.68
MSBs remain one of the most prevalent means
of initiating transfers involving IS and al- For example, IS exploited pre-established
Qaeda.66 financial networks, such as the Rawi network
of hawala and exchange houses, established in
Even in non-conflict areas with sizable the 1990s to help the former regime of Saddam
populations lacking bank access, MSBs act Hussein evade international sanctions.69
as bridge between cash-based informal In December 2016, the US and Iraq jointly
economies and the banks upon which they designated the leader of the network, Syrian
rely to effect international transfers. This layer Fawaz Muhammad al-Rawi, who had pledged
can help obfuscate illicit financial activity from loyalty to IS in 2014.70 According to the US
the global financial institutions that it transits. Treasury, the Rawi network handled millions of
As such, it is not that banks are not involved dollars for the Islamic State, including regularly
in the transfer of terror funds, but rather, that transferring hundreds of thousands of dollars
MSBs, especially those that are un- or weakly- on behalf of the IS Department of Oil to “buy
regulated, can serve as gateways to the and sell gold and eventually revert the gold
regulated financial channels. proceeds back into cash for ISIS.”71 Another
member of the network, Abd-al-Rahman Ali
Exchange houses or MSBs are among IS’s Husayn al-Ahmad al-Rawi, was “one of the
preferred means of moving funds to affiliates few individuals who provided ISIS significant
and procuring goods, and are likely used to financial facilitation into and out of Syria,”
secret-away reserves.67 Beginning in late 2015, including from Turkey, before he re-located
the Central Bank of Iraq (CBI) banned more there.
than a hundred exchange houses operating
in or around IS-controlled territory from Indeed, as the territorial caliphate collapsed, IS
participating in the country’s currency auctions, likely moved some funds to or through Turkey,
cutting them off from access to the hard via hawala72 dealers on the Syria/Turkish
currency needed to convert funds and effect border, and possibly via other militants based
66 Kais Kabtani and Dian Triansyah Djani, “Joint report of the Counter-Terrorism Committee Executive Directorate and the Analytical
Support and Sanctions Monitoring Team,” United Nations, June 3, 2020, p. 16. Available at: https://undocs.org/S/2020/493, accessed
11 November 2020.
67 The Islamic State often uses exchange houses to collect international funds, pay its fighters and employees and make purchases.
With the majority of its territory lost, exchange houses are now particularly useful to move funds out of Syria and Iraq. See: Katherine
Bauer, “Survey of Terrorist Groups and Their Means of Financing,” Testimony submitted to the House Financial Services Subcommittee
on Terrorism and Illicit Finance, The Washington Institute for Near East Policy, 7 September 2018, p. 6. Available at: https://www.
washingtoninstitute.org/uploads/Documents/testimony/BauerTestimony20180907.pdf, accessed 11 November 2020; Katherine Bauer
and Matthew Levitt, “Denying the Islamic State Access to Money-Exchange Houses,” The Washington Institute for Near East Policy,
February 3, 2016. Available at: https://www.washingtoninstitute.org/policy-analysis/view/denying-the-islamic-state-access-to-money-
exchange-houses, accessed 11 November 2020; Kabtani and Djani, “Joint report of the Counter-Terrorism Committee Executive
Directorate and the Analytical Support and Sanctions Monitoring Team,” 2020.
68 Office of the Inspector General,“Operation Inherent Resolve - Summary of Work Performed by the Department of the Treasury Related
to Terrorist Financing, ISIS, and Anti-Money Laundering for First Quarter Fiscal Year 2020,” US Department of the Treasury, January
6, 2020, p. 4. Available at: https://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-
CA-20-009.pdf, accessed 11 November 2020; US Department of the Treasury, “Treasury Designates Key Nodes of ISIS’s Financial
Network Stretching Across the Middle East, Europe, and East Africa,” US Department of the Treasury, April 15, 2019. Available at: https://
home.treasury.gov/news/press-releases/sm657, accessed 11 November 2020.
69 Ibid.
70 Thomas Jocelyn, “US designates members of Rawi network for financing Islamic State,” FDD’s Long War Journal, April 16, 2019.
Available at: https://www.longwarjournal.org/archives/2019/04/us-designates-members-of-rawi-network-for-financing-islamic-state.
php, accessed 11 November 2020.
71 US Department of the Treasury, “Treasury Designates Key Nodes of ISIS’s Financial Network Stretching Across the Middle East,
Europe, and East Africa,” 2019.
72 See FN 64 above for definition of hawala.
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